Viva Energy (ASX:VEA) share price lifts as $200m cash pledged to shareholders

The petroleum company announced bumper results for the first half of the year

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The Viva Energy Group Ltd (ASX: VEA) share price is climbing after the company released its results for the 6 months up to 30 June.

At the time of writing, shares in the petroleum company are trading for $1.99 – up 1.27%. At one point, shares reached an intraday high of $2.05. For context, the S&P/ASX 200 Index (ASX: XJO) is 0.25% higher.

Let's take a closer look at today's announcement.

Viva Energy share price jumps as gross profit more than doubles

Here are some of the highlights from Viva Energy's half-year results:

  • Gross profit of $789 million, which is up 114% on the prior corresponding period (pcp). Net profit after tax (NPAT) jumped 87.5% on the pcp to $112 million.
  • Earnings before interest, taxes, depreciation, and amortisation (EBITDA) of $256 million – up 125% on the pcp. This, however, is short of its last earnings update.
  • $224 million of operating free cash flow before expenditure.
  • An interim dividend of 4.1 cents per share (up 19.5% on the pcp). As well, the company will make a special cash payment of 6.2 cents per share after its divestment from the Waypoint REIT and will buy back $40 million worth of stock on-market. All up, Viva will return around $206 million in capital to shareholders.

What happened in the first half of 2021 for Viva Energy?  

Fluctuating oil prices have had a significant effect on the Viva Energy share price during this reporting period.

When oil prices were rising, Viva shares were rising. When Texas tea was on the downward slope, so was the Viva Energy share price. The Woodside Petroleum Limited (ASX: WPL) share price experienced a similar phenomenon.

In May, Viva and Ampol Ltd (ASX: ALD) share prices were boosted when the federal government announced a subsidy for both companies to maintain domestic oil refining capabilities.

Refineries will receive government support payments if their profit margin falls to, or becomes lower than, $10.20 per barrel of oil.

What did management say?

Viva Energy CEO and managing director Scott Wyatt said:

Viva Energy has delivered a strong result in the first half of 2021, with improved operational and financial performance across all parts of the business. Performance was driven by continued strength of our retail business, recovery within the commercial business, strong cost management, and improved refining conditions.

The company has been awarded a grant of up to $33.3 million for the establishment of 90ml diesel storage which will improve production and import economics, and further benefit from the proposed implementation of mandatory stockholding obligations. We also continue to make solid progress on our gas terminal, which remains the best-placed project to meet the looming Victorian gas shortfall expected in 2024, and have made good progress on other opportunities such as hydrogen for trucks and bus fleets. These projects are aimed at leveraging the strategic position we hold in the Victorian market.

He added:

Our retail business is benefiting from growth in the Liberty convenience business, the expansion of Shell V-Power to new markets, and the refreshment of Coles Express store network with our Alliance partner. Convenience and premium fuel sales continue to grow, and we are looking forward to further developing our fuel and convenience offerings with our partners as this marketplace continues to evolve.

What's next for Viva Energy?

Viva Energy believes it is "well-positioned" to manage the short-term material impacts of COVID-induced lockdowns across the country. The group expects retail sales to quickly recover when restrictions ease in Sydney and Melbourne.

Viva Energy share price snapshot

Over the past 12 months, the Viva Energy share price has fallen by more than 6%. Year-to-date, conversely, Viva shares have appreciated by more than 5%.

Viva Energy has a market capitalisation of approximately $3.2 billion.

Motley Fool contributor Marc Sidarous has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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